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WHY WOMEN EARN LESS THAN MEN?

She has the same qualification as her husband; they both stay in the same region and work in the same sub sector but her average earnings over time will be lower than that of her husband. It is the reality of wage gap differential between men and women. It becomes clearer when we pool women’s earnings together and compare with their male counterparts.

Average part-time female workers in UK in year 2000 earned 8% lower than what their male counterparts were earning, according to Institute for Employment Studies for the Women Equality Unit. Evidence however suggests that the gap has been reducing over the years.

Jeremiah Cotton stated that there is no doubt that there is a sizeable wage differential between men and women, the controversy however has been in explaining factors causing these differentials.

Actually, there has been no shortage of explanation. Going through some of the literatures, three main explanations are often provided (conventionally):

Those who explain the reason why men earn more than women on human resources factors believe that men averagely tend to be more skillful and productive than women. The second group however refutes the excuse that men are more skillful or productive than women. They posited that, it is the way women-issues are treated at the working place that translates into them earning less than their male counterparts (Discrimation). The third group however blames the observed wage-gap differential on estimation error. This might make the wage-gap more of perception issue than reality.

To verify this; we analysed a panel data comprising of 71,561 records of working individuals observed between 1991 and 2006 by British Household Panel Survey

The raw differential over the period shows that women average weekly-wage is about 10.81% less than their male counterparts. Those who are married have the tendency of been less paid by about 10% and those with kids increased their probability of been less paid relatively to their male counterparts by 4.79% for every number of child they have. However, women that worked in the Northern part reduced the gap by about 3.77% while those covered by Union reduced the gap by about 7.74%. It also shows that such gap becomes negative for women in Distributive Sector and Banking and Finance Industry. The gap generally declines as women obtain higher education and as they gain more experience.

After a series of tests on a comprehensive wage model; Education, Experience, Region, Industry, Union, Number of Children among others significantly affect what an individual earns but to explain the difference in what women and men earn, we decomposed difference in wages to a proportion due to discrimination in the labor market and other proportion due to differences in skill between the two groups. Decomposing these differentials using Oaxaca variant decomposition shows that skill and experience only explain about 9% of the hourly wage differential and 5% of weekly wage differentials.

If skills and experience only explain 9% of why women earn less than men, there are certainly other unexplained factors responsible for such a difference. The shocking realization is that these unexplained factors are significant.

Naijanomics however, concludes that it will be wrong to believe that wage-gap differential exists because of inappropriate estimation method (the raw data shows it exists). Neither does the explanation that it is the discrimination against women (the data used is not from Afghanistan) nor difference in skills (women have been proven to perform better in some analytical jobs than men) explain why women earn less than men. It is rather the non-financial cost of “MOTHERING” a home.

There are lots of responsibilities women handle that are not accounted for in the National Income Accounting. Women engage in so many non-monetised physical and mental engagements in the process, or in anticipation of “mothering” a home that socio-economic models find difficult to quantify.

If the cost of mothering someone like me, and the entire home is dollarized; women will actually earn more than men. Skills and education aside, those economic activies they render that are not paid for make women earn less.

This is written in recognition of unpaid-services, working mothers render to their families that invariably translate into them not fully earning their optimal economic income. (I need to pass a THANK YOU CALL to my mother)

Note: Initial data analysis was done as a postgraduate presentation at University of Manchester (Applied Ecoometrics, 2009) with Nkenchor Igue and Solomon Otajonor.

One thought on “WHY WOMEN EARN LESS THAN MEN?”

I am surprised they did not include the obvius fact that young women (generally less experienced by definition) are expected to become mothers. This dilutes the reliance factor of their empoloyers. This would show up in the data by the fact that older females (generally more expereiced) will have less of a gap in incomes.